Chris Pierce and the Yankee Donut Company

At approximately 7:30 am on Tuesday morning you, Chris Pierce, district manager for Yankee Donut Company,
leave home for your office at Yankee Donut Company’s headquarters. It is one of those beautiful fall days in New
England with the sun shining brightly. The trip to the office takes 30 minutes and gives you some time to think
about your stores without interruption.

Doughnut and Coffee Industries

America is the largest coffee consuming country in the world, accounting for one-third consumption of the world’s
coffee production. Of the 15 million people in New England, 68% are coffee drinkers. This is approximately 18%
higher than the national average. That means that approximately 11 million people drink coffee every day in New
England with the average consumption being 1.68 cups per person. More than 30% of these cups of coffee are
consumed outside of the home.

For all the coffee Americans consume, they consume an almost equal amount of doughnuts. Americans consume
approximately 10 billion doughnuts each year or an average of 40 doughnuts per person per year. The $5 billion
dollar doughnut industry is highly competitive.
In New England, doughnut consumption is slightly lower than the rest of the country. While there are no specific
statistics on doughnut consumption for New England, the largest national doughnut chain shows that in New
England 70% of their revenue comes from coffee and 30% of their revenue comes from doughnuts.

Yankee Donut Company’s History

Yankee Donut Company was founded in 1975 in Weston, Massachusetts. Yankee Donuts sold coffee, doughnuts,
and muffins in this store. The company’s slogan was “Always Fresh, Always Good!” Shortly after the first store
opened, fresh baked pastries, muffins, and gourmet coffee were added to the menu.
Today, the Weston store is still open along with more than 200 shops throughout Massachusetts, Connecticut, and
Rhode Island. Yankee Donut Company has expanded beyond coffee and doughnuts into baked local goods as well.
When customers frequent a Yankee Donut shop, they can choose from more than 30 types of doughnuts, 8 types of
muffins, and various pastries and sandwiches featuring fresh local produce. In addition, the store offers both a
special house blend coffee and many flavors of gourmet coffee.
As market demand has changed towards faster service, Yankee Donut Company has moved into targeting their
products towards commuters and busy shoppers. Even with these changes, the company’s slogan remains “Always
Fresh, Always Good!” as they continue to emphasize high quality products and service.
Over the past few years, the company has undergone tremendous expansion and has received positive press from
local papers such as The Boston Globe as well as from national journals such as Inc. Magazine.

Organizational Structure
There are several different types of Yankee Donut stores. There are full-service stores, satellite stores, and kiosks.
Full-service stores sell Yankee Donut products and make doughnuts, pastries, and muffins on site. The satellite and
kiosk stores only sell Yankee Donut products. Yankee Donut stores are located in malls, strip plazas, and downtown
areas with approximately 1/3 of the stores offering drive-thru services.
Each store is managed by a store manager. The number of employees at each store ranges from 5-15. The larger
stores may also have an assistant store manager. None of the stores are franchised. Store managers report to district
managers who are responsible for managing 10 – 20 stores. The role of the district manager is to oversee their
district of stores by tracking P&L and sales, coaching individual store managers, and building a strong network
among their stores. In addition, district managers are expected to be business builders as they focused on identifying
new store opportunities in their region and on creating new business opportunities for the company. District
managers report to regional vice presidents.

Chris Pierce: Who are you?

You began working for the Yankee Donut Company directly after college, expecting that you would work there for a
few months until you found a “real” job. However, due to your hard work and entrepreneurial spirit you found you
were quickly rewarded both in terms of financial compensation and increased responsibility. You also found that you
really enjoyed working for Yankee Donut Company. They had a positive corporate culture, treated their employees
like members of a family, and provided a comprehensive management training program. When you went out with
your friends from college and compared notes, you realized you were getting better opportunities and were being
treated better than your friends who had gone to work for Fortune 500 companies and start-ups. After six years and
numerous promotions and awards, you were made a district manager –one of the youngest in the company’s history.
You no longer thought about leaving the company, being a district manager at Yankee Donut is now your “real” job.

In your role as district manager, you are responsible for overseeing 10 stores each with its own store manager. Your
stores range in size from 5 employees at the Kiosk store to 14 employees at your largest full service store. In total, 2
of your stores are kiosks, 5 are satellite stores, and 3 are full-service stores. To help you with administrative
management of the stores, you have an assistant, Elizabeth Prakash. Elizabeth has been doing an excellent job of
assisting you with ordering, financial reports, and store/employee tracking. For a complete description of the
organizational structure as it relates to your position see Figure 1.

As you began your drive to work that morning, you were in good spirits. The job was going well and your stores
were exceeding their financial objectives. Recently, a new regional vice president had been hired above you, Adele
Reyes. Adele is a long-time Yankee Donut Company employee and is well-regarded in the company. Adele never
went to college but worked her way up from a cashier position she held almost 20 years ago. Adele is a well-
respected leader in the company and has a reputation for being tough but fair. You are very excited about working
with Adele but are concerned by a comment she made in her first staff meeting where she called you the “college
star.” You know you need to work hard to build a strong relationship with Adele.

The Changing Role of the Store Managers

As Yankee Donut Company has continued on their path of aggressive expansion, a key issue that has developed is
attracting and retaining high quality employees. This is particularly true at the store manager level as the store
manager job has become increasingly complex. In the current organizational structure, store managers are being
asked to be more independent, to take control of their own P&L, and to be more entrepreneurial in managing their
stores. The store manager role has been transformed into that of an entrepreneurial leader of a small business and
this requires store managers to have more complex business and management skills. Store managers need to have a
strong financial and accounting background, they need to research and market to their target populations, they have
to be creative and proactive in their responsiveness to customers, and they have to be strong in their interpersonal
competencies so that they can work effectively with key stakeholders and build a strong Yankee Donuts team in their
store.

In an effort to attract, retain, and develop these higher skilled managers, Yankee Donut has changed their training
and compensation plan for store managers. All new store managers participate in a 1 year fast-track advanced
business school program which involves extensive on the job training as well as classroom-based training. The
classroom-based training is taught by business school professors and combines classroom teaching with on-line
learning modules. For experienced managers, there is on-going training as well as the opportunity to participate in an
Executive MBA program. Yankee Donut pays all the costs associated with this training. In a recent issue of Fast
Company, a feature story was written about Yankee Donut’s innovative and comprehensive training program. With
regards to compensation, Yankee Donut has done competitive benchmarking to determine the appropriate
compensation structure for store managers. The average base salary for store managers is now $50,000 a year (range
from $40,000 to $58,000). The average end of year bonus is $15,000. In 2007, the highest paid store manager earned
$95,000.

In the past, store managers had always been promoted from within. However, it was clear that this model was no
longer working for Yankee Donut. There are not enough skilled employees to support the large number of new
store managers the company now needs. In addition, with the altered responsibilities of the store manager, many of
the existing store managers do not even have the skills (or the desire to develop the skills) to take on their new
responsibilities. These managers may need to be replaced with more qualified individuals. Yankee Donut is on the
edge of facing a staffing crisis.

Recently, you have hired a new manager from your alma mater and are quite pleased with how he is doing. In your
last meeting with Adele you mentioned the success you have had with David and suggested that there might be an
“untapped resource pool” on college campuses. There are a large number of colleges in the Boston area that offer
undergraduate business degrees, Boston College, Boston University, and Northeastern University to name a few, and
you believe these recent graduates might have the exact skill set that Yankee Donut is looking for in their new store
managers. In addition, you believe that if Yankee Donut positions the job correctly many students would be very
interested in the opportunity. The store manager is an entrepreneurial position in which the manager is given in-
depth training and the opportunity to run his/her own business. If a store manager stays with the company for at
least 2 years, Yankee Donut will also pay for their MBA. What more would a recent college graduate want? You
suggested to Adele that she might want to talk to the senior management team about the possibility of Yankee Donut
Company recruiting from these local colleges.

When you arrive in at your office, you notice Elizabeth is already at her desk busy with a financial analysis you need
her to finish today for your quarterly report. Marco Sanchez reminded you that your quarterly report is already a few
days overdue and that he needs to get the summary of quarterly financials to Tom Richards by the start of next week.
You sit down at your desk and turn on your computer ready to start your day.
 Exhibit A
Yankee Donut Company Organizational Chart

Tom Richards
President

Adele Reyes
Regional Regional Marco Sanchez Bert Jones
Regional Vice
Vice President Vice President CFO VP Public Relations
President

District Chris Pierce

District Manager District Manager
Manager District Manager

Elizabeth Prakash
Assistant

David Zhang Kevin Lardin Tony Pantera Carol Baker

Store Manager Store Manager Store Manager Store Manager